The decline in oil prices and strength of the job market may propel some
prime credit card metrics into new record territory, Fitch Ratings says.
We believe the decline in oil prices could indirectly lower delinquency
levels by easing consumer budget pressures. However, retail credit card
metrics are unlikely to see the same impact. And the strength of the job
market, historically, correlates to ABS credit card performance.
The oil price decline seems likely to result in a decline in gasoline
prices and heating oil this winter. Crude oil briefly fell below $28/bbl
before recovering this week. And, on Jan. 20, the Bureau of Labor and
Statistics (BLS) reported that the seasonally adjusted CPI for All Urban
Consumers declined by 0.1% in December on price declines in food and
energy. We expect this to exert downward pressure on delinquency levels
in the near term. However, a rise in oil prices in the medium term would
probably not affect other metrics. On Jan. 20, 2016 Fitch lowered its
2016 base case oil price to $45/bbl and its long-term base case price to
The strength of the job market is also having a positive impact on
credit card ABS metrics. Last month BLS said that total nonfarm payroll
employment rose by 292,000 in December, leaving the unemployment rate
unchanged at 5%.
Prime chargeoffs are expected to increase for the fourth straight month,
while 60+ day delinquencies slip slightly. However, prime gross yield
and monthly payment rate (MPR) may hit records. Gross yield will likely
increase and may reach a four-year high. MPR is likely to increase and
could reach its all-time high.
Retail 60+ day delinquencies and retail gross yield are expected to
decline marginally. Chargeoffs and MPR are expected to rise but stay in
their recent, healthy range.
This preliminary data reflect the December reporting period (as of Dec.
30, 2015) and January distribution date. Actual results will be
available in early February.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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View source version on businesswire.com: http://www.businesswire.com/news/home/20160126006567/en/
Copyright Business Wire 2016
Source: Business Wire
(January 26, 2016 - 2:43 PM EST)
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